collateral management harmonisation · • the cmh-tf asset servicing expert group reviewed...

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Collateral Management Harmonisation

CMH-TF activities

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AMI-SeCo, Frankfurt

05/12/2019

Gesa Benda

Chair of the CMH-TF

Single Collateral Management Rulebook for Europe common rules for managing collateral

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3 Organisation of upcoming work by the CMH-TF

Proposal for Wave 2 Timeline

Preparation of Adaptation Plans

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1.

Proposal for Wave 2 Timeline

Single Collateral Management

Rulebook for Europe


20022

• AMI-SeCo agreed that adoption of the ISO 20022

messaging should take place in 2 waves for activities

related to Corporate Actions and Billing Processes.

• Wave 1: November 2022 (for wave 1 actors)

• Wave 2: tbd (for all remaining actors).

• The timing of the second wave for remaining implementing

actors for CA and billing processes has now been

discussed and agreed by the CMH-TF and HSG.

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Wave 2 Considerations

• Remaining actors should adopt

ISO 20022 in a second wave.

• The CMH-TF provided its

considerations on the timing of

Wave 2 in its June, September

and November meetings.

• The proposal for the timeline for

Wave 2 has been approved by

HSG.

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Today, ISO 20022 adoption for CAs has already started in several countries across the globe (including major markets such as the US)

The regulatory context > all new messages are being developed in ISO 20022 e.g. proxy voting capability to support SRD2: September 2020 Deadline for implementation of Shareholder Identif. & Voting & Transmission of Info

Other initiatives e.g. payments migration completed as of Nov. 2021 etc.

Eurosystem announced Nov. 2022 as implementation of ISO 20022 messaging for all Eurosystem collateral management activities

Best practice for market migration > SWIFT recommendation of 5 year lead time from agreement until full market migration > Nov. 2024 implementation/support ISO20022 by remaining actors

There is a need to limit the co-existence period > impact on maintenance, costs, complexity and other STP implications

SWIFT: ISO 20022 is established, continues to grow and will cover all business processes

SWIFT: focus is on developing ISO 20022 capabilities / functionalities and have ISO 20022 as the future main standard

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Wave 2 Timeline HSG RECOMMENDATION TO AMI-SECO ON THE TIMELINE FOR WAVE 2 :

AMI-SeCo members are invited to endorse that the Wave 2 implementation deadline for ISO 20022

messaging would be November 2025: AMI-SeCo Standards for Corporate Actions and Billing Processes

on ISO 20022 messaging would become applicable for actors in Wave 2 as of November 2025, i.e. at the

latest by then account servicers should offer / support ISO20022 messaging (to clients that have the

capability to use the ISO20022 protocol).

AMI-SeCo members are invited to support that the AMI-SeCo chair (on behalf of the AMI-SeCo)

would send a recommendation letter to SWIFT with regards to the end of the co-existence of

ISO15022 and ISO20022 messaging standards which should be November 2028. HSG members take

the view that discontinuing one-to-one equivalency would be an important driver to motivate organisations

to move from one (legacy) standard to another richer standard and thus it could be recommended to

SWIFT that the MT standard should no longer be maintained as from November 2025.

AMI-SeCo is invited to endorse the HSG recommendation.

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2.

Adaptation Plans


Rulebook for Europe


Adaptation plans

Plans are requested for

AMI-SeCo Standards in

the fields of Triparty

Collateral Management,

Corporate Actions and

Billing Processes.

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Planning by (I)CSDs and TPAs

In each market, adaptation plans are being

prepared by TPAs and (I)CSDs

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AMI-SeCo Standards Triparty Collateral

Management

AMI-SeCo Standards

Billing Processes

AMI-SeCo Standards Corporate Actions

To provide adaptation plans and be monitored (for relevant Standards)

TPAs √ √ √

(I)CSDs √ √

Note: Market stakeholders in NSGs should review adaptation plans (for relevant

Standards/timings as described in the AMI-SeCo Standards): NCBs and their

counterparties, CCPs, Custodians, Issuer agents.


Adaptation Plans review by NSGs

• Draft Adaptation Plans are

currently being reviewed by

NSGs.

• Final plans (after NSG review)

must be submitted by 15

December to ECB Secretariat.

• Final plans and the list of

implementing actors will be

published on the ECB website in

January 2020.

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AMI-SeCo Standards: Planning

No. Actor Adaptation Plan

1 CSD Blue

2 TPA Green

NSG XYZ progress on planning of AMI-SeCo Standards for Corporate Actions

The plan* has been adopted by the NSG

The draft planning with milestones are defined

Preparation of the adaptation plan* has started

No plan* is being prepared

Note: * In case there is a need for a major review of the adaptation plan the colour codes apply to the

preparation and adoption of the new (updated) plan.


3. Organisation of upcoming CMH-TF work


Rulebook for Europe


Background

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• In its July 2019

meeting, AMI-SeCo

agreed the work on

the remaining areas

relevant to the

management of

collateral where

further harmonisation

is needed (with

flexible timing to

develop/implement

standards).

S C o R E

(other instruments)


CMH-TF Structure

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• To facilitate the work

on the remaining

activities four CMH

Expert Groups (EG)

have been established

• The Chairs of the

Expert Groups

debriefed the CMH-TF

on the progress of the

Expert Groups.

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Co-Chairs

Jan Grauls &

Teresa Castilla

Chair

Fabrice

Tomenko

Chair

Alessio

Mottola

Chair

Marcello

Topa


Scope

• Efficient management of collateral (involving T2S)

• Promote identifiers (transaction codes COLI/COLO)

• Support harmonised messaging (to reduce diverse email

exchanges)

• Cut-Off Times

• Sourcing of Collateral

(1) Bilateral Collateral Management Expert Group

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Scope

• Continue the work on the harmonised triparty model with a

particular focus on ISO 20022 messages/messaging guidelines. • Identification of collateral parties

• Usage of the Instruction Status Processing Advice message

• Analysing questions / topics deriving from either the AMI-SeCo

Triparty Collateral Management Standards or the harmonisation

needs previously identified. • TPAs contribution to Corporate Actions handling and Taxation processing,

e.g. with keeping collateral allocated over record date.

(2) Triparty Collateral Management Expert Group

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Scope

• Assess AMI-SeCo Standards applicability beyond debt

instruments.

• Clarifications on the implementation of the AMI-SeCo

Standards.

• Assess the need for further harmonisation.

(3) Asset Servicing Expert Group

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• Standard 6 Business day rule:

“If the payment date of a corporate action falls on a non-business day (in the

country of the currency in which the payment is due), the payment shall be

made on the next business day.”

• The CMH-TF Asset Servicing Expert Group reviewed feedback from NSGs on

the application of standard 6 to existing securities that follow the Modified

Following Business Day Convention (MFBDC).

• The application of Standard 6 to securities issued before November 2022 may

require additional guidance for the implementation of the Standard.


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Expert Group is currently assessing the following:


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Guidance for implementation of Standard 6 (to be confirmed):

• When the conditions dictated by the MFBDC apply, the record date (RD)

shall be taken at the closing of the immediately preceding business day of

the anticipated payment date (PD).

Example:

If the scheduled PD falls on a Saturday:

(i) The effective PD is anticipated to Friday and;

(ii) RD is anticipated accordingly to Thursday (close of business on PD-1)

Further considerations by Expert Group are needed for the explanation of

Standard 6. NSGs to be consulted.


Direction

• Identification of operational barriers (also from collateral management

perspective) and definition of AMI-SeCo Standards covering business

processes, workflows and messaging to overcome these barriers.

• Identification of legislative barriers hindering the full harmonisation of

taxation processes by the CMH-TF which could serve as concrete input

to the relevant authorities on further work in this area.

(4) Taxation Processes Expert Group

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1. Mapping of High-level WHT Requirements per market

2. Relevant Tax Agent(s) per market

(I)CSD, direct custodian or other entity?

Responsible for certification?

3. Beneficial Ownership/entitlement aspects

Ensure unquestionable identification of the BO

Certifications for proof of eligibility (wording, formats,

duration)

Legal BO vs economic BO, collateral giver/taker

Transaction types to define legal implications re ownership

transfer

Scope



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4. Set of tax Data Elements requested by the tax

authority and submitted by the BO

5. Mapping of transactional data

Data elements, formats, timing for detailed transaction

history

Accrued income, issue discount

Actual vs manufactured income, market claims

6. Transmission process of tax data

Incl. integrity and transparency of the flow of tax

information

7. Standardisation of tax documentation

Incl. life cycle/validity and way of submission

Scope



22 S C o R E

8. Standardisation of relief at source and tax reclaim

processes

Relief at source as prioritised process

9. Reporting function

Chain of communication (common definition of withholding

agent, e.g. CSD, custodian, investor, other appointed WHT

agent)

Unique reference number for each application

Common approach to TaxID, CoR reference, etc.

To consider existing CA events CERT WTRC and

TREC in the preparation of harmonisation proposals


Focus on relevant requirements for Depositaries that shall support

the Tri-Party Collateral Administration Model for their underlying

AIF/UCITS clients. The specific discussion focused on:

o requirements to maintain independent books and records for the

collateral assets.

o Reporting from TPCA to Depositary

o Reconciliation requirements and frequency

Upcoming changes under AIFMD / UCITS Regulation that will come into force in April 2020

23 S C o R E


Questions?


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